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Americans Pay Premium Price For LTE Cellular Service

Submitted by gma on Tue, 10/16/2012 - 07:13

(Kevin O'Brien NY Times) BERLIN — Does LTE, the superfast wireless service based on Long Term Evolution technology, cost too much in the United States? A recent study by the research arm of the GSM Association, a group based in London that represents mobile operators, suggests that may be the case.

The LTE network run by Verizon Wireless, the U.S. market leader, went live in 2010, shortly after Sweden turned on the world’s first LTE networks in December 2009.

Through June, there were 27 million LTE subscribers in the world, about half of them in the United States, according to TeleGeography, a market research firm based in Washington. South Korea is the second-largest market, with 7.5 million users, and Japan, with 3.5 million, is the third, according to the company.

LTE services are available in 21 European countries and used by 1.5 million people, TeleGeography says. Germany has the most users there.

A comparison by Wireless Intelligence, a unit of the GSM Association, suggests that being in the biggest LTE market has not brought low prices to U.S. consumers.

According to the study, Verizon Wireless, which is a joint venture of Verizon and Vodafone, charges $7.50 for each gigabyte of data downloaded over its LTE network. That is three times the European average of $2.50 and more than 10 times what consumers pay in Sweden, where a gigabyte costs as little as 63 cents.

Brenda Raney, a spokeswoman for Verizon Wireless, which is based in Basking Ridge, New Jersey, said the Verizon Wireless LTE plan cited in the study also included unlimited voice minutes, unlimited text, picture and video messages shared among 10 different data-capable devices and a mobile hotspot on the smartphone. Having a data-only plan, Ms. Raney said, would reduce the per-gigabyte charge at Verizon Wireless to $5.50 — still be more than twice the European average.

Calum Dewar, the Wireless Intelligence analyst who made the comparison, said there were several reasons for higher LTE prices in the United States.

First, U.S. operators like Verizon sell LTE as part of a larger mobile package, whereas European operators increasingly sell it as a stand-alone service at a lower price. U.S. operators are phasing out unlimited data plans, which is causing the price of data to increase above their levels in Europe, where a similar shift began two years ago. And you can buy LTE on a pay-as-you-go basis, often from virtual network discounters.

But another big reason for the trans-Atlantic discrepancy in LTE costs, Mr. Dewar said, is a difference in the levels of competition. Europe has the greatest number of operators selling LTE: 38 of 88 operators worldwide. Even small markets like Austria, Finland and Portugal have three LTE operators.

Until July, Verizon Wireless and AT&T Mobility were the only U.S. operators selling LTE nationally, Mr. Dewar said. And Verizon Wireless, which began selling LTE service in December 2010, has largely had the U.S. LTE market to itself in setting prices. In June, Verizon Wireless had 11.6 million LTE customers, and AT&T Mobility, the next biggest U.S. seller of LTE, had 750,000, according to TeleGeography.

The LTE comparison mirrors the trend for other types of mobile services, like 3G, which also tends to cost more in the United States.

U.S. consumers who bought mobile service through contracts spent $115 a month for 3G service, according to a survey conducted in May and June of 6,000 consumers in 12 countries by Ernst & Young, an accounting firm. In the Netherlands, the average was $51; in Britain, $59.

J. Scott Marcus, a senior Internet technology adviser at the U.S. Federal Communications Commission from 2001 to 2005, said European telephone behavior had developed in an environment of high prices, while U.S. habits had been shaped by low prices for landline and, initially, mobile service.

As a result, Europeans tend to be more restrained in calling and mobile surfing than Americans, said Mr. Marcus, who is an analyst at WIK-Consult, a research firm in Bad Honnef, Germany, owned by the German Economics Ministry.

The higher prices are slowing the adoption of smartphone services, according to Jonathan Dharmapalan, Ernst & Young’s global telecommunications leader.

“The No. 1 reason for customers’ discontinuing their use of a smartphone service or not taking the option is the fear of overspending,” Mr. Dharmapalan said.